Land Prices On Decline In Japan

TOKYO — Kazuhiro Kitayama, who sells condominiums for a major Japanese trading firm, is not a happy man these days. And he has plenty of company in the country`s suddenly sagging real-estate market.

Back in November of last year, Kitayama had little trouble finding buyers for the 127 condominiums in 13 buildings C. Itoh & Co. was having built in Matsudo, which is about 40 minutes by train from central Tokyo.

Although the buildings would not be completed until March, nearly all the units-which have an average floor space of 1,000 square feet and a price tag of $567,000-were sold in a matter of months.

``A few years ago they would have sold out in a single day,`` Kitayama said. But the worst was yet to come.

Early this year real-estate prices began falling and people started backing out of their contracts for the new condominiums. Now half the units are unsold.

Most of the would-be buyers canceled their contracts because they were unable to get enough money from the sale of their homes or condos to afford the new condominiums, Kitayama said.

Another Tokyo real-estate broker, who asked not to be named, said business has been seriously hurt because many potential buyers have adopted a wait-and-see attitude in the expectation that prices will continue to decline. ``Land prices around here have dropped nearly 20 percent in the past year, but people still aren`t buying,`` he said.

The average price for residential lots in three major cities-Tokyo, Osaka and Nagoya-on July 1 declined 4.2 percent from the same date last year, the first drop in 16 years, according to the results of a survey by the National Land Agency that was announced recently.

By contrast, the average price on July 1 last year was up 22.3 percent from the previous year.

An agency official attributed the decline to the success of a number of steps taken by the government designed to rein in land prices in urban areas. The government has strongly urged banks to reduce their loans to real-estate brokers and raised the official discount rate to further tighten credit. Local governments have also stepped up enforcement efforts aimed at curbing speculative land transactions.

Introduction of a new land tax has also helped reduce speculative investment in real-estate.

Land prices are likely to continue falling if the government`s tight-money policy remains in place, the official said.

The greatest decline in land prices in the agency`s survey occurred in Osaka, where the average price for a square meter (11.1 square feet) of residential property declined 15.3 percent to $3,340. Last year, the average price rose 48.2 percent.

The agency`s survey found that the average price of land in Tokyo declined only 1 percent to $3,760 per square meter. But because the survey represents the average price of land on only a single day, July 1, it`s value as an accurate gauge of land prices is sometimes questioned.

Real-estate companies in Tokyo, for instance, say they believe the actual decline has been far greater, between 20 and 30 percent, and that prices will continue dropping until at least next spring or summer.

Despite the declines, however, the price of land is still too high for many Japanese to realize their dream of buying a new house or condominium within a reasonable commute from Tokyo.

In the past five years, for instance, the price of land in the Tokyo suburb of Matsudo has tripled to $3,250 per square meter.

As a result, people are moving farther away from large urban areas such as Tokyo to find moderately priced residential lots, driving up land prices in those areas.